NEK Case Study 2: Funding by Farmers, for Farmers!

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Posted: June 3, 2016

The Northeast Kingdom Food System Plan is under development! Work is underway to update the plan, draft and vet strategies and action items, and research a series of case studies that showcase local examples of the plan’s goals. Below is a draft of one of the case studies, highlighting the Vermont Farm Fund, a revolving loan fund for farm businesses that provides minimal-hassle, zero and low-interest loans to farmers.

Many thanks to Nancy Baron, Vermont Farm Fund Program Manager, and Sarah Waring, Executive Director of the Center for an Agricultural Economy (which houses the Farm Fund), for contributing to this piece.

Funding By Farmers, For Farmers

The outpouring of financial contributions following a devastating loss of his barn in 2011 led Pete Johnson, founder of Pete’s Greens in Craftsbury, to “pay it forward”. As Johnson kept his business going while constructing his new facility, the Vermont Farm Fund was created in partnership with the Center for an Agricultural Economy. When Tropical Storm Irene hit, Johnson pulled the money out of Pete’s Greens to seed the Vermont Farm Fund, along with other contributions.

As loans are paid back, payments from one generation of loans help finance the next, promoting a virtuous lending cycle in the Vermont agricultural economy. The result? A community of farmers lending money to other farmers, quickly, easily, and without the hassle of conventional loans. Multiplying the value of donated funds, the Farm Fund has been able to make $571,000 worth of loans on a fund value of just over $250,000 in five years.

With guidance and technical support provided by the Center for an Agricultural Economy, the revolving loan fund now has two programs, Emergency Loans and Business Builder Loans.

All loans are zero or low-interest. Interest rates are static, offering a predictable lending experience, in contrast to traditional banks where interest rates may be variable or buried in fine print.

An advisory board consisting of members from across Vermont with backgrounds in agriculture, business, finance, and community development responds to requests within 10 days. The Fund aims to start payments within 14 days of receiving all completed materials. Johnson still sits on that board.

The board reviews applications to assess the applicant’s need with the ability to repay the loan. Applicants provide at least three references with their application. These personal recommendations tell a story beyond the numbers that is factored into each application – another notable difference from conventional lending. Projects with strong, realistic business plans and those scaling up new or innovative projects to strengthen the food system have more weight during the application review.

The application itself is simple and straightforward. A financial projections sheet and tax form Schedule F together makes up the application package, with business plans and balance sheets as optional attachments. The application forms have been tailored toward only the pertinent information for the board to make a decision.

To date, 41 loans have been made with 25 paid in full. Any farmer or agricultural operation in Vermont can apply. Emergency loans up to $10,000 are available for farmers facing a devastating loss from a natural disaster, such as fire, flood, or drought.

The Business Builder Loan is for non-emergency situations and allows farmers and food producers to capitalize their businesses in increments from $5,000 to $30,000. Funds can be used, for example, for capital or process improvements – equipment, marketing, or expanding access to land. These loans are repaid over a two to four year period. Traditional lending institutions typically turn down new business ventures, especially in the farming sector, making it very difficult for an entrepreneur with a great idea to get off the ground, whereas the Farm Fund has a standard minimum two years of being in business.

Since 2011, five farms in the NEK have benefitted from the Vermont Farm Fund. Tangletown Farm (a repeat Farm Fund recipient) and Pearce’s Pastured Poultry have both used Business Builder Loans to increase and manage their flocks of laying hens, and the Butterfield Brothers are starting up a yogurt-making business on their Irasburg farm. Sweet Rowen Farmstead and Heartwood Farm both benefitted from the fast turnaround after a fire and hailstorm, respectively. Sweet Rowen needed funds to keep operations going while Heartwood used its funds to simultaneously recover while investing in infrastructure.


Obtaining funding quickly, easily, and at an affordable interest rate is often a challenge for farmers and food producers. The Vermont Farm Fund offsets those challenges with its program, but finds its own difficulties in operating. The Center for an Agricultural Economy provides critical organizational infrastructure for the Farm Fund, which has only one minimal-time staff person. Advertising the Farm Fund is a Catch-22: more outreach means more requests for loans immediately after the outreach, which makes it a balancing act for the limited staff time.

The Farm Fund relies on two primary funding streams: donations from large and small philanthropists and the regular repayment of existing loans. The Farm Fund can manage about 8 – 10 loans in a given year, but needs the existing borrowers to pay their loans back (or forward!) in timely fashion. The Farm Fund also gets donations ranging in size from $10,000 dollars to just $35 or $50 from supporters each year.

Springtime can be a busy time for the Fund as farmers gear up for the season. It can be a challenge to ensure funds are available when most needed by prospective borrowers, while fall and winter slows down in lending. There is rarely a waitlist for loans but if there is, it is in the spring.

The advisory board has discussed what it would do should another statewide disaster, like Irene, hit. Securing pledges from individuals and organizations to contribute to the Fund or creating a reserve account should the need arise are options. Other ideas are on the table but the board’s main focus is on lending out the money available to farmers who need it today.

Ability to Replicate

The Vermont Farm Fund is one that could be replicated, but a similar fund is not necessarily needed for farms and farm businesses. The model works because farmers are extremely committed to paying their loans back for the next farmer to use. More than late notices from a bank, knowing your payment directly helps another farmer launch their project, or your neighbor recover from disaster, is a very strong incentive. However, the model could be replicated for other industries. All it takes is a seed fund and programmatic oversight to get going.


This innovative financing model has opened new channels for farms and farm businesses across Vermont. Fundraising is done through the work of the Program Manager and the volunteer advisory board. If supporters are unable to help the Fund, or if administrative costs got too burdensome, it would be a threat to the future of the Farm Fund.

But the Farm Fund is a testament to how dedicated, hardworking, and visionary Vermont farmers are. There is an interest in seeing each other succeed. The Farm Fund is a vehicle to do just that: as farm and food businesses succeed and diversify, they increase the availability of local food in the community and continue to strengthen Vermont’s agricultural economy.


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